If you are struggling to pay off your debts, filing for bankruptcy might be a suitable option for you. Doing so will immediately stop creditors from pursuing debt collection. This protection will continue at least until your debts are sorted out according to the law.
You have the right to retain legal representation when filing for bankruptcy. A bankruptcy attorney in Orlando with Bogin, Munns & Munns can help you decide which type of bankruptcy is best for your individual situation.
The difference between chapter 7 and chapter 13 bankruptcy is that one filing involves selling your assets, while another does not. Chapter 7 bankruptcy is known as the “liquidation” chapter. Basically, your non-exempt assets will be sold off to pay your creditors. This usually takes less than six months.
Chapter 13 bankruptcy involves a payment plan that takes anywhere from three to five years. To qualify, you must pass something called a “means test,” which measures your income and ability to pay back your creditors.
Filing for bankruptcy can be a major financial decision that may require some consideration. However, there can be several important benefits of a bankruptcy filing, depending on your financial situation.
What You Should Know About Chapter 7 Bankruptcy
Chapter 7 is known as liquidation bankruptcy. One of the most common forms of bankruptcy filings, those who opt for chapter 7 will work with a bankruptcy trustee who then will analyze and sell their applicable assets to repay creditors.
Individuals and businesses may file for chapter 7. However, those whose incomes fall above a certain level may be ineligible for this filing.
The Means Test and Income Limits for Chapter 7
The U.S. Courts notes that when you file for chapter 7, you should expect to submit documentation of your:
- Current income
- Most recent tax return
You may be subject to a means test, which is intended to limit chapter 7 filings to those below a certain income level, per the Florida Bar. If your income falls below a certain median income level, you will not have to submit the additional forms necessary to pass the means test.
Exemptions Available in Florida
Just because chapter 7 is known as liquidation bankruptcy does not mean that all of your assets must be sold off. Many exemptions are available for those filing for chapter 7 in Florida, which means that many of your assets will be protected from sale during bankruptcy proceedings. Some of your exemptions may include:
- Florida’s homestead exemption, which may allow you to protect your home equity Florida Statutes § 222.01-02
- Other personal property, including one car (up to $1,000 in equity), health aids, and other property, per Florida Statutes § 222.25
Depending on your situation, you may even fall into a category known as a “no-asset case,” in which you are deemed to own no assets after available exemptions are applied.
What You Should Know About Chapter 13 Bankruptcy
While the idea of bankruptcy may call to mind the process of selling assets, not all forms of bankruptcy entail liquidation. This is not the case for those who opt for a chapter 13 filing.
Chapter 13 does not involve the sale of assets through liquidation. Instead, you will develop a plan to repay your debts over a three to five-year period. Individuals and business owners may qualify for chapter 13.
How to File for Chapter 13
Because this form of bankruptcy entails a process of gradually repaying debt, chapter 13 is intended for those who earn a regular income. Known as a form of “reorganization” bankruptcy, these repayments are often taken out of the debtor’s future wages, according to the Florida Bar.
Unlike chapter 7, you will not be subject to a means test. However, you will have to submit several forms of documentation when you file for chapter 13, including schedule forms to note your debts, a monthly income statement, and a statement regarding your financial affairs.
The Benefits of Chapter 7 and Chapter 13
If you are unsure about the differences between Chapter 7 and Chapter 13 bankruptcy or you’re not sure which type of filing makes sense for your case, we advise that you get a free case review from our team. We will be able to help you consider how factors such as your income level, current debts, and ability to repay your debt will determine your options for filing.
Benefits of Filing for Chapter 7 Bankruptcy
Those considering chapter 7 may want to note several of its benefits, including:
- A faster filing process. While your debts could be cleared in a matter of months when you proceed with chapter 7, you will be repaying certain debts over the course of several years with chapter 13.
- An automatic stay on debt collection. Once you file for chapter 7, your creditors may not be able to collect payments or garnish your wages.
Benefits of Filing for Chapter 13 Bankruptcy
If you are in a position to take advantage of chapter 13 and you can afford to wait through a longer bankruptcy process, you may want to consider several of its benefits, including:
- Less impact to your credit score, compared to chapter 7
- No liquidation of your assets
- A stop to the foreclosure process, if you are a homeowner who is behind on your mortgage
Bogin, Munns & Munns Can Help You File for Bankruptcy
If you are feeling overwhelmed by your financial situation, you don’t have to be alone in your bankruptcy case. At Bogin, Munns & Munns, we can help you with every step of the process. We can ensure that your paperwork is filed accurately, choose the filing that’s right for you, and take advantage of any relevant exemptions.
Speak with someone from our team today for a free case review at (855) 976-1514.